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WASHINGTON, Feb. 23—The Federal Reserve Board's chairman, Arthur F. Burns, said today there was a “certain nervousness” in the business community about the size and growth of the Federal deficit and the continuation and Possible intensification of inflation. He also said he did not think this was the right time for President Carter to talk about an incomes policy to moderate wage and price increases because of businessmen's tears that price controls are “down the road.”

His remarks critical of the Lamer economic program came in testimony before the Joint Economic Committee of Congress a day after the President submitted to Congress his proposed additions to the 1978 Federal budget. These would involve spending $19.4 billion more than President Ford recommended last month. Mr. Carter's proposed Federal deficit is $10.7 billion higher than Mr. Ford's.

Dr. Burns advised the Administration to “stop talking about an incomes policy” just a few hours before President Carter reaffirmed his intention to seek “voluntary” compliance of labor and management in prior notification of important wage and price decisions.

“To the extent that I can arrive at a common understanding with industry and labor leaders that a certain amount of cooperation and information can be exchanged before a major proposal is made—I think that's a legitimate pursuit of mine,” the President said at a news conference today. He again disavowed any intention to seek power to impose mandatory controls. “I can't force. It's got to be voluntary,” Mr. Carter said.

Dr. Burns said he didn't understand “what all the fuss is about” on prior notificalion. He said the Labor Department knows in advance what contracts are coming along for renewal and that, “when businessmen are worried about pride controls down the road, this is the wrong time to stir up that issue.”

Inflation Fears

Commenting on the inflation fears the 72‐year‐old Fed chairman said as pipe smoke swirled above his thick white hair: “I don't want to criticize anyone but in all humility I have to say that the increase in the Federal budget is stirring up new fears and expectations of inflation that in sonic degree may turn out to he a self‐fulfilling prophecy.”

What Dr. Burns says is considered highly important because of his position as one of the nation's top economic decision makers. It also reflects the constitusncy he speaks for in Wssh'ngton, His rob brings him into intimate contact with key business leaders and bankers, and his views as a conservative tend to match theie own conservatism.

His words carry particular weight at a thine when President Carter is seeking to revive business confidence and encourage more corporate investment in plant and equipment to spur faster economic growth and put more people to work.

Dr. Burns is not a member of the Administration. Congress made the Federal Reserve an independent entity when it was established in 1913. Purposely removed from day‐to‐day political pressures, the Federal Reserve controls growth of the nation's money supply, which influences the general level of interest rates.

Testified on Money Growth

In testimony last month before the House Banking Committee Dr. Burns pledged that there would be adequate monetary growth to accommodate President Carter's economic stimulus program, even though Dr. Burns said he was not in favor of any added stimulus at all.

Today he told Senator Hubert H. Humphrey Democrat of Minnesota, that he hoped the Fed would not be put under pressure to expand the money supply faster than it was slready doing because of inflationary implications. “In my view.” Dr. Burns declared, “the Fed has erred on the side of excessive liberality.”

He said the Fed intended to follow policies that would “support good expansion in economic activity but which will vvoid the release of new inflationary pressures or expectations.”

Special to The New York Times

WASHINGTON, Feb. 23—Arthur F. Burns, chairman of the Federal Reserve Board, called today for the International Monetary Fund to take a surveillance role to prevent overexposure of commercial bank leading to less‐developed countries.

He said he had already communicated “in strident tones” to leading bankers his concern about the risks of repayment on some of the $50 billion of loans American banks alone have outstanding to developing countries that are not oil producers.

“We need to develop the rule of law in this field,” Dr. Burns told the Joint Economic Committee of Congress, “and the only instrument for this is the I.M.F. Unless we have the rule of law, we will have chaos.”

His idea, which may well become an American initiative in international financial negotiations, was essentially that commercial bank lending from industrial countries should be keyed to acceptance by the borrowing country of I.M.F. conditions.

Meanwhile, Dr. Burns declined to comment on a statement by Senator Hubert H. Humphrey that two of the five biggest banks in New York City were on the Federal Reserve's ‘watch’ list of problem banks because of their high third‐world exposure. “Even if I knew, I couldn't tell you,” Dr. Burns said later to reporters, he emphasized, however, that a bank's being on the list did not mean the institution was going under but meant only that it was being “monitored more closely.” Asked how many banks were on the list, the Federal Reserve chairman said, “Too many.”

Senator Humphrey, a Minnesota Democrat, said his information came from an official of the preceding Administration who made the disclosure at a public meeting of economic forecasters in Los Angeles early this month. The official, Michael Granfield, was senior econom.lst on President Ford's White House economic policy group and is now a professor in the business school of the University of California at Los Angeles.

Declines to Specify Banks

Mr. Granfield confirmed in a telephone interview that he had made the statement in a speech on the problems of lending in general. He declined to name the Minks on the watch list. He said his information came not from the Federal Reserve but from a senior banking official in New York who had supplied the information on a confidential basis.

The five leading banks of New York are Citibank, Chase Manhattan, Manufacturers Hanover, Chemical Bank and Morgan Guaranty. Mr. Granfield, clarifying the reference in his speech to New York's five biggest banks, said that one of the two banks on the watch list was among these five and that the other bank on the list would rank among New York's top 10.

There was no indication when the two banks were put on the list. Last August the Federal Reserve Board rejected a proposed acquisition by the Bankers Frust New York Corporation, citing “financial” difficulties at this institution. 5

In New York, however, a Bankers Trust spokesman said yesterday that the bank had not been advised of any concern on the part of the Federal Reserve about its loans to less developed countries. He added that the bank had not written off any such loans on its books.

Banks Unaware of a List

Spokesmen for four of New York's five I biggest banks—Citibank, Chase Manhattan, Manufacturers Hanover and Chemical—either said they had no knowledge of any “watch list” on which their institution.

I tions were being carried or said the Federal Reserve had not expressed any concern over the condition of loans to less‐developed countries.

The fifth hank, Morgan Guaranty, said that as a matter of policy it never cornwilted on regulatory matters.